Resuming sharp reversal into 1.3140.
Exited at 1.3655. Achieved first price objective.
EUR/USD is resuming its sharp reversal from key overhead resistance (primarily an important 2 year trend-line). The dramatic move has confirmed the emotionally charged bull-trap that we had anticipated, which has been driven by recent positive EU News.
The recent break under 1.3653 (18th Oct low) unlocks further downside scope into 1.3146 (Oct swing low) and that all-important psychological level at 1.3000.
Further pressure is also weighing from broad risk-related proxies. The euro currently shares a high correlation of 0.85% with the S&P500 which is now falling sharply from its recent multi-week highs.
Inversely, USD Index has turned back higher above its long-term 200-day MA. The bulls are likely to recapture the recent 6-month highs near 80.
Speculative (net long) liquidity flows are holding steady around their recent spike highs (3 standard deviations from the yearly average). This will likely remain strong and help resume the USD’s major bull-run from its historic oversold extremes (momentum, sentiment and liquidity).
STRATEGY: Exited at 1.3655. Achieved PT1 Objective.
Support expected near 1.5853.
A break back over the 1.6127 high would lead us to remove the strategy below from the report.
GBP/USD continues to trade close to the recent low at 1.5877 after failing to break over the recent high at 1.6167, maintaining our structural arguement that the rise from 1.5877 is a corrective. Scope is now seen for a final swing lower to test the old platform near 1.5853, ahead of a possible higher low versus 1.5632 for a fresh swing back towards 1.6167.
Medium-term structure is dominated by a generally range bound environment, with a return to the highs of the annual range possible, near 1.6618/1.6747. Our bias remains positive due to the near-term bullish structure that is in place.
While above 1.5632 further strength is favoured. However, if this region fails to contain the current corrective phase, then the bias will turn negative again.
Sterling is expected to stay stronger then most, should the US Dollar enter into a strengthening phase.
STRATEGY: Buy limit 3 at 1.5840, Objs: 1.5940/1.6153/1.6400, Stop: 1.5740.
Probability now favours retracement to pre-intervention levels.
USD/JPY is edging lower, with the growing probability of another price retracement back to pre-intervention levels (PIR) and potentially even a new post world war record low beneath 75.35 (PINL).
Furthermore, sentiment in the option markets continues to suggest that USD/JPY buying pressure remains overcrowded as everyone in the market continues to try and be the first to call the market bottom.
This may inspire a temporary, but dramatic, price spike through psychological levels at 75.00 and perhaps even sub-74.00. Such a move would help flush out a number of downside barriers and stop-loss orders, which would create healthy price vacuum for a potential major reversal.
The medium/long-term view remains bullish, as USD/JPY verges toward a major long-term 40 year cycle upside reversal. Expect key cycle inflection points to trigger into November-December this year, offering a sustained move above our upside trigger level at 80.00/60, then 82.00 and 83.30.
Keep in mind that such a scenario would help reactivate the longer-term technical bias, including prior monthly DeMark™ exhaustion signals, within the ending diagonal pattern, launhcing a powerful recovery into 91.00.
STRATEGY: Awaiting Renewed Buy Trade Setup.
Under 0.8960 will warn of the end to the corrective phase.
USD/CHF may have completed a symmetrical correction from the low at 0.8568, after reaching 0.9151 yesterday. We now wait to see if the 0.9151 high can contain price on the upside. Also, if a break under 0.8923 can be realised then this would increase the probability of a return to weakness.
While below 0.9316, medium-term structure is suggestive of a re-test of the zone close to 0.8242, ahead of a possible return to 0.9316. However, should EUR/CHF reach the 1.2000 level again, then movement in USD/CHF may be affected by the efforts of the SNB to maintain the floor in EUR/CHF. Back under 0.7712 is required to change the medium-term bullish bias.
Safe haven flows may yet intensify into the Swiss Franc as Italian government bond yields push higher despite last week’s ECB rate cut.
STRATEGY:Sell limit 3 at 0.9100, Objs: 0.9000/0.8750/0.8550, Stop at 0.9200.
Bulls hold gains above psychological 1.0000 level.
USD/CAD’s short-term price activity remains positive, following the sharp bullish reversal from the psychological 1.0000 level (prior trading range).
Positive momentum needs to push above 1.0264 and 1.0400 to rebuild the potential major upside reversal higher above the old resistance level at 1.0673 (August high & Congestion zone).
Only a sustained close beneath here will unlock bearish setbacks into the long-term 200-day MA at 0.9823 and 0.9726 (31st Aug low).
A strong directional confirmation above here will open a much larger recovery into 1.0850 plus. This would extend the upside breakout from the rate’s ending triangle pattern, which was part of a major Elliott Wave cycle.
EUR/CAD is extending above its 200-day MA, within a large multi-month trading range. Key resistance continues to hold at 1.4379 (June swing high), which has for some time marked a strong distribution pattern.
CHF/CAD is retesting its support nearby the 200-day MA at 1.1314, following the dramatic price slide lower (triggered by the SNB intervention). The cross-rate has now retraced more than half of its 2011 gains.
STRATEGY: Long 3: 1.0250, Objs:1.0360/1.0480/1.0670, Stop: 1.0050.
Sharp setbacks weigh.
AUD/USD’s sharp setbacks continue to weigh. The move was triggered from key resistance at 1.0765 (01st Sept high) and is now holding beneath the 200-day MA (1.0417).
A sustained move below here is likely to mount downside pressure on the rate’s multi-year uptrend.
Elsewhere, the Aussie dollar remains stable against the New Zealand dollar. The pair is still locked within its new bear cycle structure while it holds beneath its 200-day MA. Key support can be found at 1.2320 and 1.2100.
The Aussie dollar has reversed gains against the Japanese yen and is now trading back below the long-term 200-day MA which is currently at 83.11. Near-term support continues to hold at 77.63 (18th Oct low). A break here will resume downside scope into 76.70 and signal further unwinding of risk appetite.
STRATEGY: SHORT 2: 1.0570, Obj: 1.0010/0.9710, Stop: 1.0470.
Approaches a region where support is anticipated.
GBP/JPY is approaching a region where a degree of support would be anticipated, just ahead of the 122.38/65 platform. Should a fall down to these levels be realised, this would also potentially complete the corrective structure that has been witnessed since 127.32.
The fall down to the current trading zone also unwinds the surge higher that took place at the very end of October. It is this unwinding that we have been expecting ahead of any potential fresh strength.
Bigger picture a rise towards 129.00/130.00 is possible, given the daily structure present since 116.84. A push back under 121.39 is needed to negate this positive structure.
STRATEGY: Buy limit 3 at 122.70, Objs: 124.10/126.00/127.32, Stop: 121.30.
Meets initial resistance close to the 38.2% retrace.
EUR/JPY formed a corrective structure in the hourly timeframe and has subsequently broken under 106.50. This now triggers the bearish flag that we had seen in the daily timeframe, warning of further losses towards 104.00 and possibly lower.
Yesterday saw support close to the 61.8% retrace of the 100.76 – 111.60 rise, after meeting 104.73. From there a test of the region close to the 38.2% retrace of the 108.25 – 104.73 fall has already taken place. Failure to hold under this 38.2% retrace will warn of a minimum return to the 106.50 region.
Structure present since 108.25 also suggests scope for a further leg lower back towards 100.76 if a sustained break under 104.75/3 can be achieved.
A sustained hold over the 200 day moving average will turn the outlook bullish.
STRATEGY:SHORT 2 at 106.45, Objs:104.00/100.76, Stop: 106.45.
Breaks under long-term trend-line support.
EUR/GBP is re-testing old trend-line support as resistance after pushing out of a three month range with a break under 0.8530/31. This now warns of a larger breakout to the downside to target 0.8285/0.8068. Such a move will be assisted by the perception of Sterling as a safe haven, assuming the yields of Italian government bonds can stay elevated.
In the near-term, a break back over 0.8652 is required to neutralise the outlook once again. In the meantime a lower high is sought for a further extension lower.
Failure to hold under the old double bottom and trend-line will warn of a false break lower, with a danger that trade returns back into the old trading range. Meantime scope is seen for a near-term return to 0.8486 initially.
STRATEGY:Short 3 at 0.8555, Objs: 0.8455/0.8285/0.8068, Stop: 0.8655.
Continued resistance expected close to 1.2500.
EUR/CHF has remained strong particularly in light of the movement in Italian government bond markets, where 10 year yields are maintaining a foothold over 6.00%. Also, as mentioned before, it highlights the inability of the ECB to contain sovereign debt yields by simply lowering the base rate. This may lead to a renewed desire for a safe haven, with downside pressure returning to EUR/CHF.
Initial resistance has been seen close to the recent high at 1.2474, with scope for a further correction, towards 1.2300 initially. Should a re-test of the 1.2000 region take place with a fall under 1.1973 also following, this would warn of the end of the recovery seen since 1.0075, increasing the probability of a return to this level.
In any case, strong resistance is anticipated should this rate reach the 1.2500 zone. The recent failure to maintain trade above the 50 week moving average is also noted.
Time will tell whether or not the SNB will be able to hold back the possible flow of funds into Swiss Francs that may occur if further stresses lead to yet higher yields in Italian government bonds.
STRATEGY: Sell stop 3 at 1.2130, Objs: 1.2030/1.1526/1.1002, Stop: 1.2230.
Positive for the short-term.
Gold remains fragile after its dramatic 20% price fall, which helped confirm the extreme overbought conditions (marked by DeMark™ indicators). This also timed a key cycle peak, ahead of that all-important $2000 glass-ceiling.
However, short-term price activity is building constructively higher around key level at 1760. A sustained move above here would open moves into 1844.
Speculative (net long) flows remain a concern having recently breached a key downside level which may threaten over 2 years of sizeable long gold positions.
There is heightened risk of a much larger decline if we confirm a weekly close beneath $1600 and $1554-30 (200-day MA/swing low), which has not been breached in 3 years!
A number of “bargain hunting” trend-followers will be watching this benchmark “line in the sand” for repeat support or a potential big squeeze lower into $1300 and perhaps even $1040-1000. Remember, this would still offer a unique buying opportunity in the near future.
STRATEGY:Awaiting New Sell Trade Setup.
Key support at $26.0700.
Silver has developed a short-term recovery from its previous swing low at 26.0700. However, macro price structure continues to focus on the downside risks, following the major sell-off in September.
Such a dramatic move traditionally produces volatile trading ranges. This allows the market to have enough time to recover and accumulate renewed buying interest.
Expect a large trading range to hold between $37.0000-26.0700 over the multi-week/month horizon, with downside macro risk into $21.5165 (61.8% Fib-1999 bull market) and $20.0000. This would still maintain silver’s long-term uptrend and help offer a potential buying opportunity for the eventual resumption higher.
Continue to watch the gold-silver “mint” ratio which has now accelerated higher by 67%, suggesting further risk aversion over the next few weeks.
STRATEGY: SHORT 3: 34.1300, Obj: 29.9700/26.0700/23.3400, Stop: 35.6880.
Source http://www.fxstreet.com/technical/analysis-reports/technical-trading-strategies/2011-11-11.html
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